Western Digital's stock experienced a 24-hour plunge of 6.35% during the pre-market session on Friday, reflecting a severe downturn across the memory and storage chip sector.

The sell-off was primarily triggered by new regulatory measures from South Korea's Financial Services Commission targeting single-stock leveraged ETFs. The regulations, which raise margin requirements and restrict speculative trading, have accelerated the deleveraging of funds that had been active in memory stock trading, amplifying selling pressure. This action specifically impacted memory chip leaders, with the weakness spreading from Asian to U.S. markets.

Furthermore, the decline is part of a broader correction in the AI-driven memory chip rally. Investors are reassessing the sustainability of the AI spending boom, questioning future supply-demand dynamics for High Bandwidth Memory (HBM), and taking profits from stocks that had seen substantial gains. Geopolitical tensions and a general reduction in risk appetite for high-valuation technology sectors have also contributed to the downturn.